Microsoft has an Announcement Scheduled for May 20, Will They Introduce a Surface Mini Tablet?

On Thursday, May 7, 2014, Bloomberg published an article titled Microsoft Said to Use Qualcomm Chips in Smaller Surface. The article was written by Ian King and Dina Bass.

The article reports “Microsoft Corp. (MSFT) is planning to introduce a new, smaller version of its Surface that will use Qualcomm Inc. (QCOM) processors for the first time,” The publication of this article, rather soon after the publication of IDC’s latest survey of the worldwide tablet market makes sense.

As I wrote in a recent blog post, IDC survey results spelt problems for Microsoft, and for NVIDIA. The former saw its likely quarterly worldwide tablet sales numbers folded into the “other category”, while the Android O/S and Samsung were reported to have grown sales, year over year, by 32%. I surmised the repercussions of the IDC report on the latter, NVIDIA, could lead to the demise of their efforts to play a major role as a tablet chip vendor.

I should also note I hypothesized Microsoft might interpret the results to be a good reason to exit the tablet market, at least with the Surface product line.

If the Bloomberg article is credible (and we will all hear the answer to this question when Microsoft holds its scheduled meeting on May 20th), then it’s clear Microsoft is digging deeper into the worldwide competition for tablet consumers, opting for, perhaps, a less costly CPU for a smaller Surface, the long awaited “Surface Mini”. Of course, we can not tell how NVIDIA has been affected by Microsoft’s decision to drop the Tegra for the Qualcomm SnapDragon processor, but it is safe to say the result will be less than positive and, perhaps, important enough “bad news” for product management to re-evaluate the extent of NVIDIA’s commitment to the tablet market.

I would not be surprised to learn at Microsoft’s next quarterly earnings report about how the Surface Mini, with the Qualcomm processor will deliver more margin, and a lower cost of goods sold. Both of these production improvements may contribute to a point or two or more of additional margin on the hardware.

Disclaimer: I’m long Microsoft and have no present position in NVIDIA, Samsung, Qualcomm or Google. I am neither affiliated with IDC, nor with Bloomberg LLP.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Will Cortana Provide Windows Phone 8.1 with the Momentum Required to Win a Bigger Share of the Smart Phone Market?

Worldwide markets for what I collectively call small, smart mobile devices appear to be reaching a plateau. The progression of the high end smart phone market has shown signs of taking this direction over the last year and a half. Most recently, IDC’s report on first calendar quarter 2014 worldwide sales of tablets showed the same trend.

In my opinion, the tactic likely to be the most popular for competitors in, at least, the smart phone market, will be to cannibalize each others customers in an effort to continue to increase share of the market.

Consumers will continue to play the dominant role in purchase decisions. Price discounting should become prevalent. Trade-in offers will play their role, which will contribute to higher costs for channel partners and manufacturers.

A light in all of this darkness will be any new technological feature, well received by the public, which a competitor will be able to leverage to at least maintain price, if not margin. Cortana, the new “personal assistant” Microsoft® has announced for Windows Phone 8.1, looks to be this type of factor.

As I wrote earlier in this blog, there are many reasons for further potential in current smart phone technology around the notion of speech-to-computing features. To quickly restate my position, by definition, smart phones are mobile devices. For one reason, or another, consumers on the go cannot, and should not, be using screen or keyboard input devices to perform computing procedures. Cortana has received across-the-board positive review from popular press. This product has all of the features required to provide consumers with a voice activated method of processing computing tasks.

When technology increases the usefulness of a device like a smart phone, then manufactures have the tool needed to either justify holding a market price, or even increasing it. It doesn’t make sense for Microsoft to expect a price increase for its own handsets built on the Windows Phone 8.1 O/S once Cortana is released. But it does make sense to expect Microsoft to gain market share from competitors at the high end of the market for this new feature.

Disclaimer: I’m long Microsoft

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Microsoft Enters the Next Stage of Its Mobile First Cloud First Strategy

During Microsoft’s Q3 2014 Earnings Conference Call, Mr. Satya Nadella, CEO, signaled an important transition for the business: from “reinvention” to execution of its “Mobile First/Cloud First” Strategy. This signal can be found in Mr. Nadella’s response to a question posed by Mr. Keith Weiss of Morgan Stanley.

Mr. Weiss asked if Mr. Nadella is ” . . . reviewing the businesses? And should we expect any big changes in the strategy of Microsoft?” (this quote is excerpted from a transcript of Microsoft’s Q3 2014 Earning’s Conference Call. Readers can review the entire transcript on the Seeking Alpha web site).

Mr. Nadella responded to this question by emphasizing ” . . . this mobile-first, cloud-first thing is a pretty deep thing for us.” (ibid). The signal of transition sends an important message to anyone following Microsoft®: the strategy has been vetted, accepted, and is now being implemented across the organization.

One can argue the performance of the business, for the quarter, as it’s represented in the report is evidence of the transition. For revenue to grow by 8%, year-over-year, is a significant, positive achievement. Microsoft no longer appears as a “software REIT”, resting comfortably in its niche. Rather, the company has assumed some of the qualities of a high growth story. In comparison to Google, which, one can argue best typifies this type of “new” business, the growth trajectory of Microsoft’s revenue performance came within 33% of the former’s own year-over-year performance for the same calendar quarter.

But the story gets better. Office 365, which is Microsoft’s cloud, SaaS, offer grew over 100%. Mr. Nadella and Ms. Amy Wood, CFO publicized an annual run rate of $2.5 Billion for this product, 28% better than the year-over-year performance of Google’s “Other Business” segment, which was reported as producing $1.8 Billion for the same time period.

Perhaps readers will want to recalibrate their notion of Microsoft’s likely performance over coming quarters as the result of gaining an understanding of what the signal means for Mr. Nadella and the rest of the Management team.

Disclaimer: I’m long Microsoft

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved



With Windows Phone 8.1, Microsoft Sees an Opportunity to Emphasize the Personal in the Consumer PC Experience

As Joe Belfiore, Corporate Vice President, Operating Systems Group (PC, Tablet and Phone) states at the start of his keynote presentation at Microsoft’s Build 2014 Conference, one of the drivers for the Windows Phone O/S was to produce an experience “a little bit less like technology, and a lot more about you”. Belfiore then claims “we think Windows Phone is the world’s most personal smart phone”.

This preamble leads up to the public debut of Cortana, Microsoft’s personal assistant feature, which will be a very prominent new feature of Windows Phone 8.1 when it is released to the user community this summer. As Belfiore demonstrated, Cortana represents a substantial enhancement to the voice-activated capabilities of Windows Phone. The added power of this personal assistant amounts to a combination of a presumably embedded Bing client, and a set of data collection and analytics features designed to quickly put together a richly featured profile of the owner of the Windows smart phone.

All of the above is very significant, but I want to use this post to illustrate an important component of the Microsoft® computing brand. As I wrote in 2012, in a post to this blog titled Microsoft Understands the Evolution of Personal Computing from Desktop Computers to Handheld Devices, consumers now refer to PCs, but rarely to “personal computers”.

This evolution of consumer awareness of the “personal computer” into simply the “PC” amounts to bad news for product marketers of PC products, applications, etc. In its ad for the SuperBowl, in 1984, Apple at once echoed a comparable emphasis on the personal, but combined it with a notion of the Macintosh as the computer of “the revolution”. The outcome of this marketing communication effort is history.

But Microsoft certainly has an opportunity to reclaim the personal. Belfiore’s presentation of Windows Phone 8.1 at Build 2014 continues the branding effort for Windows Phone as the Personal Smart Phone (synonymous, for me, with the notion of computer), which I picked up back in 2012. This is good news for the Windows Developer community. It would be helpful if the Marketing Communications team could come up with a better method of delivering the same message to consumers.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Microsoft Presents InTune Mobile Device Management on an Android Device

On March 27, 2014, Microsoft® General Manager Julia White demonstrated Office applications running on her iPad, and InTune, Mobile Device Management running on a Samsung Galaxy Note 10.1. A lot of market commentary was published in advance of this presentation. Much of it had to do with a “new direction”, or a “sober realization” on Microsoft’s part. Microsoft tablets, smart phones, and even XBOX consoles simply weren’t going to magnetize the critical mass of consumers required. The software ports included in the demonstration would represent its capitulation to the BYOD market dominance of iOS and Android competitive devices.

But back on June 3, 2013, in a presentation titled “Enabling People-Centric IT”, Andrew Conway, Director of Product Marketing for Microsoft’s Window Server System Center referred to a 2012 presentation of Microsoft’s App Side Loading Service for iOS. Conway noted the broad surprise the audience expressed, back then, as they watched Microsoft software running on an iOS powered device.

Evidently, Microsoft recognized markets had forgotten these earlier presentations. So White’s demonstrations of Office running on the iPad and InTune Mobile Device Management running on an Android tablet were, in my opinion, added onto Satya Nadella’s presentation of “ubiquitous computing”, and “ambient intelligence” as a method of recapturing earlier surprise.

To further debunk the notion these positions are, in fact, anything really new for Microsoft, anyone reviewing the recording of Conway’s 2013 presentation will note the amount of time he spends on a screen titled “Waves of Innovation”. Apparently the need to direct markets to associate Microsoft with the notion of computing innovation was a prominent objective of marketing communications efforts more than 6 months prior to the public announcement of Satya Nadella as the new CEO for this mature ISV. Once again, anyone watching the personal cameo video introduction of Satya Nadella on the Investors web site will note the emphasis he places on innovation. But keep in mind the theme is not a new one for the company.

Finally, anyone following Microsoft should be familiar with their long standing objective to deliver one uniform computing experience across the complete range of devices and settings experienced by their consumers. This objective powers the Windows, and Windows Phone Operating Systems, and the Surface RT port of Windows 8.0 and, most recently, 8.1. This objective is by no means a new emphasis for the business.

What markets may miss by erroneously categorizing the March 27, 2014 presentations as evidence of a new direction for the business, is an important point of the Office port to iOS. This port is written for the iPad iOS device. The subscription to Office 365 is an optional method of obtaining Office for the iPad. By creating a version of Office compatible with the iPad, Microsoft opened an important opportunity to convert some portion of the enormous iOS app developer realm into customers for the Active Directory services included in this demonstration. In my opinion this latter opportunity is substantial. These developments should be very welcome news for enterprise IT organizations in need of AD support for their iOS devices. iOS App developers targeting an enterprise computing market will likely jump all over it.

Disclaimer: I’m long Microsoft.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


BlackBerry Reports On Its 4th Quarter, 2014 Business Results

On Friday, March 28, 2014, Blackberry reported 4th Quarter, 2014 Results. In his opening remarks, John C. Chen, CEO informed his audience ” . . . [he is] extremely pleased . . . ” with the quarter results, which placed the business ” . . . slightly ahead . . . ” of objectives. I should note Chen alluded to an “8 Quarter Plan”, which was laid out in the Q3, 2014 Earnings Presentation, which was his first earnings call subsequent to taking over as CEO of the business.

By noon on Saturday, March 29, 2014, a lot of analyst commentary had been published on this earnings call. Most of the published copy focuses on the real impact of the earning surprise included in the results: Analysts estimated Blackberry would report a loss of $ .55 per share, but the actual reported loss amounted to $ .08. On the other hand, revenue was substantially below analyst estimates, coming in, for a first time since 2007, at less than a $1 Billion. Markets paid more attention to the revenue miss, and Blackberry’s stock dropped 7.07% for the trading day, closing at $8.41.

In my opinion, market response to Blackberry’s reported earnings revealed investor impatience with Chen’s plan to transform the business. Chen was “extremely pleased” with the results, but markets sold off on the stock. If this disconnect is not somehow repaired prior to Blackberry’s Q1, 2015 earnings call, “longs” like me should brace themselves for a repeat sell off.

Here are some points I put together as I listened to the webcast:

  1. Analysts clearly expected Blackberry to not only report a successful effort to substantially reduce the quarterly loss (the first objective of Chen’s 8 Quarter Plan), but also report a floor in corporate and consumer sales capable of fueling a $1 Billion + revenue run rate while the business continues to address its cash flow and profitability problems.
  2. Chen’s comments on the “Bold” Handset, and the soon to be released “Classic”, demonstrated precisely the type of highly reactive, flexible, “Ready, Fire, Aim” approach someone in his position needs to maintain. Unfortunately, subsequent to this call, and Chen’s appearances on CNBC and Bloomberg TV, a number of writers theorized how his remarks actually indicated a departure from his stated objectives to transform the business from a hardware mobile device handset manufacturer, into an enterprise ISV. Chen repeated, on a number of occasions, his willingness to sell products customers “ask for”, which, in my opinion, makes perfect sense.
  3. The Jakarta debut, scheduled for early April, should provide anyone following Blackberry with some highly valuable indication of whether Chen can shore up handset sales as he continues to address the task of transforming Blackberry’s sales force into a direct-to-enterprise team, and his channel partnerships into something more profitable for the business.

Chen clearly understands the need for specific focus on successfully attaining very near term future objectives. It would certainly help if analysts, and, perhaps, investors also dropped a big picture view for something a lot grittier and grimey — making it through the next few business quarters.

Disclaimer: I’m long Blackberry.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Comments On Satya Nadella’s Presentation on the Intersection of Cloud and Mobile

On March 27, 2014, Satya Nadella, Microsoft’s CEO presented a summary of Microsoft’s concept of the intersection between cloud and mobile to the press in a webcast lasting a bit longer than a half hour. The title of this webcast is simply Satya Nadella press briefing webcast, but, in my opinion, Nadella used the opportunity to extend on themes introduced when he assumed the position of CEO for this mature ISV. Anyone following Microsoft® with a half hour to spare should benefit from viewing the recording.

One of the most important of these themes is innovation, which Nadella mentions barely more than a minute into the presentation: ” . . . . our customers want to know what is our innovation agenda . . . ” He notes ” . . . the team is really ready for it . . . ” When this observation is put together with a fragment from Nadella’s preface, where he observes he’s only been in this position for fifty two days, one can readily see how Microsoft has used little more than 5 weeks to mount a credible market message about a business, once a follower of a set of leaders, to one recently added to the leadership ranks, running at the head of the pack.

Nadella goes on to introduce two new slogans: “ubiquitous computing” and “ambient intelligence”. My immediate reaction when I heard the first of these was to flash on some comments made by Larry Page during his last Google Quarterly Earnings Report, where he spoke of what I would summarize as a “proliferation of screens”.

Perhaps its safe to say the same thread runs through both of these visions of a near term future computing paradigm: for Page, more and more segments of human interaction take place over “screens”, at the same time, these “screens” likely provide the crucial conduit for software to enter daily life for Nadella, and, the “ubiquitous computing” opportunity resulting from this congruence creates ” . . . an amazing canvas for innovation and amazing opportunity for growth for our company”.

If Page and Nadella both share this same view, albeit from different vantage points, is it safe to say Microsoft plans on challenging Google on a much more panoramic field than simply search, or even Apps?

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Intel’s Reference Design for 64-Bit Smart Phone and Tablet Computers Attracts Positive Reviews from Mobile World Congress, 2014

Intel hasn’t enjoyed much success in the mobile market for smart phones and tablets. But on February 24, 2014, in a press release titled “Intel Gaining in Mobile and Accelerating Internet of Things”, Intel announced the launch of its ” . . . 64-bit Intel(R) Atom(tm) processor for smart phones and tablets . . . ” (quote is an excerpt from the press release). A reference design of a smart phone built on this processor and board showed up at Mobile World Congress. This prototype, running the Android KitKat OS, was well received by reviewers at the conference.

One of the reviews, Intel Merrifield Smartphone Reference Design, was published by Mobilegeeks.de. on the same day the Intel® published the press release for the 64-bit Atom solution. On several occasions the Mobilegeeks reviewer notes what she takes to be a major improvement in the product (as compared with Motorola’s Razr i, I would suspect), specifically the shorter length of the phone, which permits one hand gaming. There are quite a number of these reviews online. I did not find any strongly negative comments on the reference design.

So, if the mobile community actually warms up to this platform, what’s the impact for Intel? In my opinion, a right answer will be, necessarily complex. It’s certainly a positive to have a well received reference design, but the announced list of OEMs (ASUS, Lenovo, Dell and Foxconn) for this chip solution, with the exception of Leonovo (and only as the result of its plan to acquire Motorola Mobilty from Google), have zero footprint in the consumer smart phone manufacturing market. In my opinion the absence of a leading smart phone manufacturer will be a very hard obstacle for Intel to overcome. The choice to build the reference design with an Android KitKat OS will likely exclude Nokia from the list of likely targets for the platform.

Therefore it makes sense to assume, perhaps, three quarters of minimal sales for this product line as a significant smart phone manufacturer comes to the surface. At the same time each of the announced OEMs offers several table computing products. Expect to see the 64-bit Atom chip solution, with the Android OS, popping up in some tablet designs.

But HP (conspicuously absent from the above list of OEMs) just released two tablets with the 64-bit Atom processor, BayTrail, running Microsoft® Windows 8.1. You can read a review of the tablet in an article published on the PC World web site, titled HP ships first 64-bit Windows 8.1 tablets with Intel Atom. So it’s clear tablet OEMs on the Windows OS side of the market are keen on the 64-bit Atom BayTrail cousin to this solution. These sales will likely ramp up faster, but for a smaller overall market (focused on business end users).

Disclaimer: I’m long Intel.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


HP Introduces 64-Bit Tablets, but are the Price Points Too High?

Intel® 64-bit Atom processors in a BayTrails configuration provide the processing power behind HP’s new ElitePad line of tablets for business computing.

The début of tablets running Windows 8.1 o. 64-bit processors is certainly a significant event for Intel, which promised accelerated efforts to beef up its presence in the mobile computing markets for tablets and smart phones.

But each of these tablets, with WiFi and Cellular data communications capabilities, carries a retail cost of at least $909.00, which makes any of the models more expensive than even Apple’s iPad Air tablets (the iPad Air with 64GB and comparable data communications capabilities carries an online price, via the Apple Store of $829.00 as of March 19, 2014). The effective price penalty, baked into the HP ElitePad, is not a promising development for Intel. I’m not sure whether the higher price is the result of HP passing through higher cost for 64-bit Atom/BayTrail solutions onto the consumer, or not, but the end result will likely be the same — anemic sales for these tablets.

PC World recently published an opinion on these tablets. In an article written by Agam Shah, titled HP Ships First 64-bit Windows 8.1 Tablets with Intel Atom. Shah published an estimated retail price of $739.99 for the basic model, which I did confirm on the HP SMB web site.

Competitive pricing is certain to be critically important to the success of Intel’s efforts to establish a position in the 64-bit tablet market for CPUs. Apple clearly owns the high end of the BYOD business market for these tablets. I would argue even the HP Elite Pad price mentioned in Shah’s review, $739.99, is still too high. Neither Intel, HP, nor Microsoft will benefit when the cost, for business users, to enable BYOD hardware with a native Windows 8.1 OS, exceeds the cost of the present market leader (let’s not forget the iPad Retina Mini, which includes a 64-bit processor, Wi-Fi and/or cellular connectivity, and 64GBs of storage at a retail price of $729.00). I would argue the Windows OS, while certainly a potentially valuable feature, is not critical for business consumers using Software as a Service (SaaS) cloud offers.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Highlights from the Keynote Presentation, Mobile World Congress, 2014, by Ginni Rometty, IBM CEO

Ginni Rometty, CEO at IBM®, delivered one of the Keynote sessions at Mobile World Congress, 2014. Her presentation focused on what she presented as today’s 3 prevalent themes (Rometty referred to them as “shifts”) changing the segment of the technology industry servicing enterprise business:

  1. Data
  2. Cloud
  3. and Engagement

Rometty characterized the current climate for ISVs like IBM as “both an exciting time and a disruptive time” (quoted from a video recording of Ginni Rometty’s Keynote at Mobile World Congress 2014. A link to a “Full Video” of here presentation has been provided, above).

But her own estimates of how long it will take large organizations of computer users (enterprise business and comparably sized communities in the public and not for profit sectors) to actually complete their shift to new paradigms for each of the themes was surprisingly conservative.

Rometty’s estimates are important. David Kirkpatrick, who introduced Rometty, claimed “IBM is the largest professional services company in the world.” (Ibid). Rometty, herself, offered some impressive statistics on IBM’s experience in the mobile computing market: ” . . . 6000 mobile engagements. We’ve had partnerships with 40 of the wireless carriers around the world, and we’ve spent decades building what I hope you think is a very good ‘Mobile first’ portfolio.” (Ibid).

1) Data
Rometty presented data as our newest “natural resource”. She focused on the enterprise business market for analytics and Business Intelligence (BI) systems. She claimed both of these types of enterprise system benefit most when the biggest set of data possible (she claimed enterprises are presently creating 2.5 million GBs, per day) is exposed to them.

She claimed “3 out of 4″ IBM customers are piloting big data projects right now, ” . . . Or have them in production.” (Ibid). But she went on to note only “1 out of 3” were using big data, BI, and analytics, right now, for product innovation. The remainder of her presentation on this first point amounted to a clear presentation of why IBM has mustered a lot of resources (she announced a cumulative investment, to date of $24 Billion dollars) to lead in this market.

2) Cloud
Rometty’s comments on the cloud theme were more cautious. She prefaced a prediction on enterprise business appetite for Cloud products and services with the caveat “when properly done”. By 2016, she predicted, ” . . . A quarter of the apps will be in the cloud.” (Ibid)

This pace is by no means meteoric. The preferred architecture for most enterprise businesses, she predicted, would be hybrid cloud, with 50% of companies implementing hybrid clouds by 2017.

I should add Rometty emphasized the importance of cloud security as a gating issue for enterprises businesses. Another point worth noting: Rometty announced IBM had spent $7 Billion on cloud, less than 1/3 of what they had invested in big data.

3) Engagement
Her presentation on this last theme, in my opinion, amounted to a preface to a presentation of IBM’s Watson product, as an example of the type of system enterprise business requires to successfully engage with today’s consumers. Rometty characterized today’s consumers as exhibiting an ever expanding willingness to provide personalized data in return for truly useful information. Once all this information is digitized, then a system like Watson will provide users with a uniquely capable tool to address rapidly shifting consumer requirements.

What was missing from her presentation on the engagement theme, in my opinion, was any meaningful mention of how businesses can transform social systems (blogs, newsfeeds, etc) into another version of the same kind of information Rometty claimed the data and cloud themes will eventually produce for product innovation.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved